Of bribes, bullets and bargains
Brave investors see rewards amid the debris

Oct 14th 2010 | MANAMA

IRAN is a hard place to do business because of sanctions. Iraq, its neighbour, is a hard place to do business because of everything else (see chart). Yet some firms in Iraq are notching up double-digit growth. The country has “the best prospects for oil in the world,” says Sara Akbar, chief executive of Kuwait Energy. It claims the world’s second-largest reserves, yet its wells are woefully underdeveloped. After years of war and a trade embargo that ended in 2003, the country is crying out for investment in just about everything.

A slew of oil contracts was signed last year; more will follow. Construction is booming, thanks to government contracts, though funds often go missing. Mobile-phone penetration is surging, though that is partly because you need three different phones to ensure coverage throughout Baghdad. Emad Makiya, the boss of Zain Iraq, a telecoms firm, complains that the armed forces sometimes jam frequencies.

Consumer goods are pouring in. Iraqis crave Western brands they could not buy during the embargo, an era nicknamed “the Chinese years” for all the cheap Asian goods on the shelves.

Almost every industry needs modernising, from health care to tourism (probably more than 1m Iranians visit Iraq’s holy sites each year). A few bold investors are tiptoeing in. Bartle Bull, a banker, sees a chance to pay “rock-bottom” prices for a piece of “one of the richest economies in the world.”

Investments that bring know-how would be useful. But that would require more skilled foreigners to move to a country whose own engineers and doctors have fled in droves. Few are tempted. Iraqi businessmen gripe that CNN exaggerates the violence in their country, but it is real enough. Large investors such as General Electric, Lafarge and Arcelor Mittal have so far clustered in the Kurdish north, a semi-autonomous region that is safer, more open and has better hotels. A Kurdish businessman scoffs that the state-owned hotels in Baghdad “haven’t been refurbished…since Saddam’s time.”

Corruption is another woe. Iraq was fifth from the bottom of Transparency International’s corruption-perceptions index last year. One Gulf businessman told your correspondent that he gave up on a deal in Iraq after nine different officials came to ask him for bribes.